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505-555 Level|   Long Passage|   Social Science|            
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Federal efforts to aid minority businesses began in the 1960's when th 22 Dec 2018, 20:51
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Question 5. based on information in the passage, which of the following would be indicative of the pragmatism of mesbic staff members?
Ⅰ.a reluctance to invest in minority businesses that show marginal expectations of return on the investments
Ⅱ. a desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
Ⅲ. a belief that the minority business sector is best served by investing primarily in newly established businesses.

premise 1: Mesbic directors think mainly in terms of the "social responsibility approach" and thus seem to prefer deals that are riskier and less attractive than normal investment criteria would warrant.

premise 2 : Mesbic minority staff members are pragmatic in their approach and feel that minority entrepreneurs and businesses should be judged by established business considerations.

option 1 - Low return investment isn't pragmatic - Hence this is correct
option 2 - Good and services produced for the sponsoring company will aid the sponsoring company . This is pragmatic according to the minority staff members point of view - Hence correct.
Show more


On reading the passage again, found the below line that explains II as true.
Line from passage -->:" The MESBIC then provides capital and guidance to minority businesses that have potential to become future suppliers or customers of the sponsoring company."
What the line states --> The above line implies that the minority comp. and the sponsoring company, have the same market/area of interest/business.

I did get this question wrong, in my first attempt. Below is the lesson I learnt.
Strategy to use --> HUNT/LOOK for the key word or similar words.
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Federal efforts to aid minority businesses began in the 1960's when th 24 Feb 2019, 03:02
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VeritasPrepKarishma Could you please explain Q4 and why Choice E is wrong while C is right. As per the passage "While this program enabled many minority entrepreneurs to form new businesses, the results were disappointing, since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates".
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Federal efforts to aid minority businesses began in the 1960's when th 22 Aug 2019, 01:17
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GMATNinja, GMATNinjaTwo - Can you please explain why Optuon B is incorrect in Q2? I marked it referring to the following line from the passage. "The MESBIC then provides capital and guidance to minority businesses that have potential to become future suppliers or customers of the sponsoring company".

Thanks
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Federal efforts to aid minority businesses began in the 1960's when th 23 Aug 2019, 07:49
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Quote:
3. Which of the following does the author cite to support the conclusion that the results of the SBA program were disappointing?

(A) The small number of new minority enterprises formed as a result of the program

(B) The small number of minority enterprises that took advantage of the management and technical assistance offered under the program

(C) The small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation

(D) The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program

(E) The small number of minority enterprises that chose to participate in the program
Show more

any expert can help explain this one? where i located is
Quote:
since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates.
Show more
because i thought this is as a reason to support the conclusion that results of the SBA program were disappointing, while the discussed location about Q3 is Even 15 years after the program was implemented, minority business receipts were not quite two percent of the national economy's total receipts. . i cannot understand why my location is incorrect. please help...
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Federal efforts to aid minority businesses began in the 1960's when th 01 Sep 2019, 02:39
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The Official Guide for GMAT Review 10th Edition, 2003

Practice Question
Question No.: SC 13 ~ 18
Page: 324
Federal efforts to aid minority businesses began in the 1960's when the small business administration (SBA) began making federally guaranteed loans and government-sponsored management and technical assistance available to minority business enterprises. While this program enabled many minority entrepreneurs to form new businesses, the results were disappointing, since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates. Even 15 years after the program was implemented, minority business receipts were not quite two percent of the national economy's total receipts.

Recently federal policymakers have adopted an approach intended to accelerate development of the minority business sector by moving away from directly aiding small minority enterprises and toward supporting larger, growth-oriented minority firms through intermediary companies. In this approach, large corporations participate in the development of successful and stable minority businesses by making use of government-sponsored venture capital. The capital is used by a participating company to establish a minority enterprise small business investment company or MESBIC. The MESBIC then provides capital and guidance to minority businesses that have potential to become future suppliers or customers of the sponsoring company.

MESBIC's are the result of the belief that providing established firms with easier access to relevant management techniques and more job-specific experience, as well as substantial amounts of capital, gives those firms a greater opportunity to develop sound business foundations than does simply making general management experience and small amounts of capital available. Further, since potential markets for the minority businesses already exist through the sponsoring companies, the minority businesses face considerably less risk in terms of location and market fluctuation. Following early financial and operating problems, sponsoring corporations began to capitalize MESBIC's far above the legal minimum of $500,000 in order to generate sufficient income and to sustain the quality of management needed. MESBIC's are now emerging as increasingly important financing sources for minority enterprises.

Ironically, MESBIC staffs, which usually consist of Hispanic and Black professionals, tend to approach investments in minority firms more pragmatically than do many MESBIC directors, who are usually senior managers from sponsoring corporations. The latter often still think mainly in terms of the "social responsibility approach" and thus seem to prefer deals that are riskier and less attractive than normal investment criteria would warrant. such differences in viewpoint have produced uneasiness among many minority staff members, who feel that minority entrepreneurs and businesses should be judged by established business considerations. these staff members believe their point of view is closer to the original philosophy of MESBIC's and they are concerned that, unless a more prudent course is followed, MESBIC directors may revert to policies likely to recreate the disappointing results of the original SBA
approach.
1. Which of the following best states the central idea of the passage?

(A) The use of MESBIC's for aiding minority entrepreneurs seems to have greater potential for success than does the original SBA approach.

(B) There is a crucial difference in point of view between the staff and directors of some MESBIC's.

(C) After initial problems with management and marketing, minority businesses have begun to expand at a steady rate.

(D) Minority entrepreneurs wishing to form new businesses now have several equally successful federal programs on which to rely.

(E) For the first time since 1960, large corporations are making significant contributions to the development of minority businesses.

Show Spoiler
A

2. According to the passage, the MESBIC approach differs from the SBA approach in that MESBIC's

(A) seek federal contracts to provide markets for minority businesses

(B) encourage minority businesses to provide markets for other minority businesses

(C) attempt to maintain a specified rate of growth in the minority business sector

(D) rely on the participation of large corporations to finance minority businesses

(E) select minority businesses on the basis of their location

Show Spoiler
C
3. Which of the following does the author cite to support the conclusion that the results of the SBA program were disappointing?

(A) The small number of new minority enterprises formed as a result of the program

(B) The small number of minority enterprises that took advantage of the management and technical assistance offered under the program

(C) The small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation

(D) The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program

(E) The small number of minority enterprises that chose to participate in the program

Show Spoiler
C

4. Which of the following statements about the SBA program can be inferred from the passage?

(A) The maximum term for loans made to recipient businesses was 15 years.

(B) Business loans were considered to be more useful to recipient businesses than was management and technical assistance.

(C) The anticipated failure rate for recipient businesses was significantly lower than the rate that actually resulted.

(D) Recipient businesses were encouraged to relocate to areas more favorable for business development.

(E) The capitalization needs of recipient businesses were assessed and then provided for adequately.

Show Spoiler
C

5. The author refers to the "financial and operating problems" (line 38) encountered by MESBIC's primarily in order to

(A) broaden the scope of the discussion to include the legal considerations of funding MESBIC's through sponsoring companies

(B) call attention to the fact that MESBIC's must receive adequate funding in order to function effectively

(C) show that sponsoring companies were willing to invest only $500,000 of government-sponsored venture capital in the original MESBIC's

(D) compare SBA and MESBIC limits on minimum funding

(E) refute suggestions that MESBIC's have been only marginally successful

Show Spoiler
B

6. The author's primary objective in the passage is to

(A) disprove the view that federal efforts to aid minority businesses have been ineffective

(B) explain how federal efforts to aid minority businesses have changed since the 1960's

(C) establish a direct link between the federal efforts to aid minority businesses made before the 1960's and those made in the 1980's

(D) analyze the basis for the belief that job-specific experience is more useful to minority businesses than is general management experience

(E) argue that the "social responsibility approach" to aiding minority businesses is superior to any other approach

Show Spoiler
B

7. Based on information in the passage, which of the following would be indicative of the pragmatism of MESBIC staff members?

I. A reluctance to invest in minority businesses that show marginal expectations of return on the investments
II. A desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
III. A belief that the minority business sector is best served by investing primarily in newly established businesses

(A) I only
(B) III only
(C) I and II only
(D) II and III only
(E) I, II and III

Show Spoiler
C

8. It can be inferred from the passage that the attitude of some MESBIC staff members toward the investments preferred by some MESBIC directors can best be described as

(A) defensive

(B) resigned

(C) indifferent

(D) shocked

(E) disapproving

Show Spoiler
E

9. The passage provides information that would answer which of the following questions?

(A) What was the average annual amount, in dollars, of minority business receipts before the SBA strategy was implemented?

(B) What locations are considered to be unfavorable for minority businesses?

(C) What is the current success rate for minority businesses that are capitalized by MESBIC’s?

(D) How has the use of federal funding for minority businesses changed since the 1960’s?

(E) How do minority businesses apply to participate in a MESBIC program?

Show Spoiler
D

Show more

13 min 10 seconds... 8 correct 1 wrong (no. 7)
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Federal efforts to aid minority businesses began in the 1960's when th 02 Sep 2019, 20:55
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GMATNinja, GMATNinjaTwo - Can you please explain why Optuon B is incorrect in Q2? I marked it referring to the following line from the passage. "The MESBIC then provides capital and guidance to minority businesses that have potential to become future suppliers or customers of the sponsoring company".

Thanks
Show more
Let's take one more look at the answer choice:

Quote:
2. According to the passage, the MESBIC approach differs from the SBA approach in that MESBIC's...

(B) encourage minority businesses to provide markets for other minority businesses
Show more
  • In the SBA approach, the SBA makes loans and government-sponsored management/technical assistance available to minority businesses directly. As a reminder, the SBA ("small business administration") is a federal government administration. We see this in Paragraph 1.
  • In the MESBIC approach, the MESBIC ("minority enterprise small business investment company") is an investment company that is run by a large corporation. In this approach, large corporations act as intermediaries, making use of government capital and providing their own guidance to minority businesses with growth potential. We see this in Paragraph 2.
  • Paragraph 3 mentions that in the MESBIC approach, the sponsoring companies (which are large corporations) provide access to potential markets for minority businesses.

OK, so the essential difference between SBA and MESBIC is that SBA consists of direct assistance to minority firms from the government, while MESBIC brings in large corporations to provide assistance to minority firms (using government funds).

Checking this against choice (B): Does the MESBIC approach "encourage minority businesses to provide markets for other minority businesses?

No. In the MESBIC approach, large corporations provide markets for minority businesses. The passage does not describe a situation where minority businesses provide markets for each other. That's why we eliminate (B).
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Federal efforts to aid minority businesses began in the 1960's when th 02 Sep 2019, 20:57
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Quote:
3. Which of the following does the author cite to support the conclusion that the results of the SBA program were disappointing?

(A) The small number of new minority enterprises formed as a result of the program

(B) The small number of minority enterprises that took advantage of the management and technical assistance offered under the program

(C) The small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation

(D) The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program

(E) The small number of minority enterprises that chose to participate in the program

any expert can help explain this one? where i located is
Quote:
since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates.
because i thought this is as a reason to support the conclusion that results of the SBA program were disappointing, while the discussed location about Q3 is Even 15 years after the program was implemented, minority business receipts were not quite two percent of the national economy's total receipts. . i cannot understand why my location is incorrect. please help...
Show more
Hi zoezhuyan!

I'm unclear on your request. Is there a specific answer choice that you believe is correct, but don't understand why it's incorrect?

One thing I can tell you is that this question is asking us how the author is measuring the "disappointing" results of the SBA program. Every answer choice points to a specific measurement, challenging us to confirm whether that measurement really matches how the author defines disappointing results in the passage.

I hope this helps a bit? Or feel free to clarify your question, and we'll do our best to answer.
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Federal efforts to aid minority businesses began in the 1960's when th 03 Sep 2019, 22:59
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GMATNinja

Hi zoezhuyan!

I'm unclear on your request. Is there a specific answer choice that you believe is correct, but don't understand why it's incorrect?

One thing I can tell you is that this question is asking us how the author is measuring the "disappointing" results of the SBA program. Every answer choice points to a specific measurement, challenging us to confirm whether that measurement really matches how the author defines disappointing results in the passage.

I hope this helps a bit? Or feel free to clarify your question, and we'll do our best to answer.
Show more
Quote:
3. Which of the following does the author cite to support the conclusion that the results of the SBA program were disappointing?

(A) The small number of new minority enterprises formed as a result of the program

(B) The small number of minority enterprises that took advantage of the management and technical assistance offered under the program

(C) The small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation

(D) The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program

(E) The small number of minority enterprises that chose to participate in the program
Show more

Hi GMATNinja, I am confused with B and D.
Is B evience about managerial inexperience, is D evidence about captical shortage?

i initional located "since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates.", then i thought i need find something about managerial inexperience, unfavorable locations, and capital shortages" then i was sunked into (B) The small number of minority enterprises that took advantage of the management and technical assistance offered under the program ,(D) The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program, i though both can be evidence about the managerial inexperience and captical shortage, then both can ve evidence to support the conclusion

please help...
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Federal efforts to aid minority businesses began in the 1960's when th 19 Sep 2019, 15:13
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GMATNinja

Hi zoezhuyan!

I'm unclear on your request. Is there a specific answer choice that you believe is correct, but don't understand why it's incorrect?

One thing I can tell you is that this question is asking us how the author is measuring the "disappointing" results of the SBA program. Every answer choice points to a specific measurement, challenging us to confirm whether that measurement really matches how the author defines disappointing results in the passage.

I hope this helps a bit? Or feel free to clarify your question, and we'll do our best to answer.
Quote:
3. Which of the following does the author cite to support the conclusion that the results of the SBA program were disappointing?

(A) The small number of new minority enterprises formed as a result of the program

(B) The small number of minority enterprises that took advantage of the management and technical assistance offered under the program

(C) The small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation

(D) The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program

(E) The small number of minority enterprises that chose to participate in the program

Hi GMATNinja, I am confused with B and D.
Is B evience about managerial inexperience, is D evidence about captical shortage?

i initional located "since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates.", then i thought i need find something about managerial inexperience, unfavorable locations, and capital shortages" then i was sunked into (B) The small number of minority enterprises that took advantage of the management and technical assistance offered under the program ,(D) The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program, i though both can be evidence about the managerial inexperience and captical shortage, then both can ve evidence to support the conclusion

please help...
Show more
Remember that this question is asking us which choice is something the author cited to support the author's conclusion. Our task is to identify which choice actually matches the text — more specifically, we want the choice that states the same evidence or reasoning that the author states in order to support the conclusion in this passage.

The conclusion is that the results of the SBA program were disappointing. You're looking in the right place to confirm what the author is citing to support this conclusion:

Quote:
While this program enabled many minority entrepreneurs to form new businesses, the results were disappointing, since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates. Even 15 years after the program was implemented, minority business receipts were not quite two percent of the national economy's total receipts.
Show more
We have two statements here:

  • Managerial inexperience, unfavorable locations, and capital shortages led to high failure rates. This supports the conclusion by naming the major causes of disappointing results.
  • Minority business receipts were not quite two percent of the national economy's total receipts. This supports the conclusion by providing direct evidence of disappointing results.

Choice (C) — "The small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation" — is correct because it directly matches the passage — specifically, the second statement listed above.

Choice (B) — "The small number of minority enterprises that took advantage of the management and technical assistance offered under the program" — doesn't match up with either of the statements. Citing the managerial inexperience of entrepreneurs is NOT the same as citing a low rate of participation in management and technical assistance. It doesn't matter that this could logically support the conclusion, because the author never made this connection in the passage.

Choice (D) — "The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program" — also doesn't match up with either of the statements. The author never cites a low rate of federal loan repayment in order to support the conclusion of disappointing results of the program. Again, the logic of this statement on its own does not matter, because the author never makes this connection in the passage.

That's why we should feel very comfortable eliminating (B) and (D).

(C) is the only choice that accurately reflects what the author cited, so it remains our best option.

I hope this helps!
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Federal efforts to aid minority businesses began in the 1960's when th 31 Jul 2020, 07:15
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Hi GMATNinja SajjadAhmad, GMATNinjaTwo, bm2201, I have a query in question number 2. Option D says Large cooperations will finance the small businesses, but the passage says that Large businesses will use govt. venture capital. So, large businesses are not financing it, just acting as intermediaries.

could you please solve my query?
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Federal efforts to aid minority businesses began in the 1960's when th 31 Jul 2020, 09:54
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Hi GMATNinja SajjadAhmad, GMATNinjaTwo, bm2201, I have a query in question number 2. Option D says Large cooperations will finance the small businesses, but the passage says that Large businesses will use govt. venture capital. So, large businesses are not financing it, just acting as intermediaries.

could you please solve my query?
Show more


Hi shubham88,

In 2nd Para it is mentioned: "large corporations participate in the development of successful and stable minority businesses by making use of government-sponsored venture capital. The capital is used by a participating company to establish a minority enterprise small business investment company or MESBIC. The MESBIC then provides capital and guidance to minority businesses that have potential to become future suppliers or customers of the sponsoring company."

and in the next para we see: "MESBIC's are the result of the belief that providing established firms with easier access to relevant management techniques and more job-specific experience, as well as substantial amounts of capital,................Further, since potential markets for the minority businesses already exist through the sponsoring companies, the minority businesses face considerably less risk in terms of location and market fluctuation."

The above lines imply that large corporations act as intermediary to support minority businesses, by using the govt capital to establish MESBIC, which provides further capital and guidance to minority business.
You could also use the method of elimination to get to D, all other options can be directly negated.

Let me know if this helps.
Thanks.
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Can anyone please explain for question 7 , why is the answer B ??
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Can anyone please explain for question 7 , why is the answer B ??
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Hi LipsaTripathy,


Please refer this answer: https://gmatclub.com/forum/federal-effo ... l#p1929534


Let me know if you still have doubts.

Thanks.
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GMATNinja

For Q2, Why E is incorrect?
(E) select minority businesses on the basis of their location
One of the reasons for failure was unfavourable location, so SDA could not select its preferred location whereas MESBIC run by large corporation could select minority business based on the location of large corporation.

While this program enabled many minority entrepreneurs to form new businesses, the results were disappointing, since managerial inexperience, unfavorable locations
Further, since potential markets for the minority businesses already exist through the sponsoring companies, the minority businesses face considerably less risk in terms of location and market fluctuation.
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Federal efforts to aid minority businesses began in the 1960's when th 10 Jul 2022, 01:59
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GMATNinja KarishmaB

Q4. Which of the following statements about the SBA program can be inferred from the passage?

(D) Recipient businesses were encouraged to relocate to areas more favorable for business development.
Why D is incorrect?
Since the reason for failure was unfavourable location, SDA might have encouraged for relocating to favourable areas. Hence D can be inferred.
Can you explain what's the meaning of "unfavourable location" in para 1 in terms of impact on minority business?
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Federal efforts to aid minority businesses began in the 1960's when th 24 Jul 2022, 12:09
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Sneha2021
GMATNinja KarishmaB

Q4. Which of the following statements about the SBA program can be inferred from the passage?

(D) Recipient businesses were encouraged to relocate to areas more favorable for business development.
Why D is incorrect?
Since the reason for failure was unfavourable location, SDA might have encouraged for relocating to favourable areas. Hence D can be inferred.
Can you explain what's the meaning of "unfavourable location" in para 1 in terms of impact on minority business?
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The issue with your analysis is the word "might" -- the SBA might have have done many things. Sadly, we have no information implying that the SBA actually DID encourage small businesses to move. Maybe no one realized until it was too late that unfavorable location played a key role. Or maybe the other factors were much more important to address, and moving locations came at the bottom of the list. Who knows?

We can, on the other hand, infer (C):
Quote:
(C) The anticipated failure rate for recipient businesses was significantly lower than the rate that actually resulted.
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The key lies in this sentence: "While this program enabled many minority entrepreneurs to form new businesses, the results were disappointing, since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates."

Since the high failure rates were disappointing, we can infer that the SBA did not anticipate those high failure rates. If the actual failure rate was closer to the anticipated failure rate, there would not have been such disappointment.

I hope that helps!
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Federal efforts to aid minority businesses began in the 1960's when th 09 Sep 2025, 19:05
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